Paper #1143

Title:

Judicial presence and rent extraction

Authors:

Stephan Litschig and Yves Zamboni

Date:

May 2008 (Revised: December 2012)

Abstract:

We estimate the effect of state judiciary presence on rent extraction in Brazilian local governments. We measure rents as irregularities related to waste or corruption uncovered by auditors. Our unique dataset at the level of individual inspections allows us to separately examine extensive and intensive margins of rent extraction. The identification strategy is based on an institutional rule of state judiciary branches according to which prosecutors and judges tend to be assigned to the most populous among contiguous counties forming a judiciary district. Our research design exploits this rule by comparing counties that are largest in their district to counties with identical population size from other districts in the same state, where they are not the most populous. IV estimates suggest that state judiciary presence reduces the share of inspections with irregularities related to waste or corruption by about 10 percent or 0.3 standard deviations. In contrast, we find no effect on the intensive margin of rent extraction. Finally, our estimates suggest that judicial presence reduces rent extraction only for first-term mayors.

Keywords:

Institutions, Corruption, Rents, Local Governments.

JEL codes:

D02, D72, D78, H41, H83.

Area of Research:

Labour, Public, Development and Health Economics

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